Foreign Affairs: How Romney’s Millions Went Tax-Free Overseas

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On the same day that Mitt Romney cracked his birther “joke,” new evidence indicated that he and his partners at Bain Capital have used questionable methods to avoid federal taxes – including a scheme that transforms corporate stock into untaxed offshore “derivatives,” and a practice that converts management fees into capital gains, which are taxed at a far lower rate.

While nobody has asked to see the Republican candidate’s birth certificate, as he said at a Michigan rally on Friday, everybody has a renewed interest in examining the tax returns he continues to withhold.

The complex and tricky tax shelters used by Bain Capital continued to emerge from as lawyers and other experts examined the hundreds of pages of previously confidential company documents uncovered by the Gawker website in an exclusive series this week. The authenticity of the documents was confirmed by a Bain spokesperson, who said that the company deplores the public posting of its proprietary materials.

In a sense, the latest revelations about how Bain protected its vast income from taxation are scarcely surprising to anyone familiar with the world of private equity where Romney made his fortune, estimated at $250 million or more. Avoiding taxes is among the most important attractions of that industry for the wealthy clients it aims to attract.

But several experts who have looked over the new Bain documents have warned that dubious legal tactics may have been employed by some of the company’s investment vehicles, including several that are listed on the partial returns that Romney has already released. Those experts, such as Victor Fleischer, a law professor at the University of Colorado, and Daniel Shaviro, who teaches tax law at New York University’s law school, have raised questions about both the equity “swap” and fee conversion maneuvers.